IEA warns global markets to remain flooded with oil without OPEC cut

Global oil markets may run into a third straight year of oversupply in 2017 unless the OPEC agrees to cut output, the International Energy Agency warned on Thursday.

In its closely watched monthly report on the oil market, the IEA said that output from the Organization of the Petroleum Exporting Countries increased by a 230,000 barrels a day to a record high of 33.83 million barrels a day in October and is projected to remain elevated this month.

Such figure, shows the IEA, is way higher than the high-end of the cartel’s proposed output range it said it would work towards targeting in Algiers two months ago.

OPEC, the 14-member oil group responsible for more than one in every three barrels of global supply, is still discussing individual country targets. The IEA noted the urgency for the country members to find a way to agree significant cuts when they meet on November 30.

The importance of the above, the agency said, is related to the fact that production from outside the cartel is expected to keep increasing in 2017.

"If no agreement is reached and some individual members continue to expand their production then the market will remain in surplus throughout the year, with little prospect of oil prices rising significantly higher. Indeed, if the supply surplus persists in 2017 there must be some risk of prices falling back," the IEA said.

Crude prices have climbed to around $46 a barrel from the multi-years lows in January of roughly $27, but they are still 60% below where they were in mid-2014, when the extent of the excess first became evident.

The IEA noted it was not its role to urge any oil industry player to take one course of action rather than another. Over time, it said, market forces will do their job and the oil price will respond to the signals provided by demand and supply.